from Persistent to Consistent

Thinking of trading? Read this first…

[Karina Hollekim video added 2nd Nov 2014]

[Updated 9th May 2012]

[Updated 5th Sept 2011]

[Video added 8th Oct 2011]

[JFK Video added 8th Nov 2011]

[Amy Purdy Video added 12th Dec 2011]

Please keep in mind that these comments are highly UK specific and based on my own views, opinions and experiences so far. You will have to take responsibility for your own actions so read, comment and most importantly – think for yourself…

This is in many ways a very broad summary of my outlook and written for people who are interested in learning to spread bet based on more than 9 months of me being less than successful so far… Here’s the kickoff 😉

I don’t think most people get into trading because they like trading.

My belief is that the majority of people open a trading account because they are focussed on the end goal (which is sold as a Midas-like ability to pluck unlimited cash from thin air) rather than any stage in between.

For whatever reason they have an issue (usually around lack of money = ironic) that they think trading can fix. Trading is sold as a short-cut to an amazing lifestyle of ‘working’ 30 minutes per day, sitting on a beach and not having to answer to a boss. Here are bullet points from some spam related to trading which is pretty standard: –

Set your hours to suit you. To succeed as a trader requires as little as an hour a day.

It’s easy to start. All you need is a computer, trading account, charting software – and the right training, of course!

You can trade from anywhere. As long as you can plug into the Internet, you can trade.

No tax on earnings. Spreadbetting in the UK is not taxed, so you keep everything you make.

Yep, you’ll notice it promises you’ll be able to trade. Great. No promises about being able to make money though – haha 😉

Only the last of these four points is completely factually correct but if your main income is from spread-betting you will be taxed on it. So in fact none of these points are true! (Thx to JDTrader for the correction/comment below)

Statistical probability shows that if you have enough people doing the same thing then x% of them will be completely awesome at it. They may be naturally talented. However, at this initial stage it will actually be a small number of people winning if you’re getting them all to perform a complex task. Let’s call these ‘retail’ clients and their ‘lose’ rate is probably about 90% i.e. lots of people open an account and lose money. So they quit.

I’m completely serious in writing that there are companies out there actively promoting this dream as a way of parting you from your cash rather than actually teaching you to trade. If it’s too good to be true then it’s too good to be true. Ok? Good! You have been warned.

If you still can’t relate to the paragraph above and haven’t traded before then the following should make it abundantly clear. For people who I’ve talked to before or who have read this some of my blog already I’ll also clearly state I’m loving trading – This vid is only for the ‘newbies’ and illustrates what most people are thinking, especially when they’ve been ‘sold’ to 😉

So please be very careful if you’re looking at certain UK based companies that promise to teach you to trade over a weekend. They’ll have really nice offices, you might learn the basics (stuff you can pick up from a book) but it’s essentially a waste of your money and only leads to an ‘upsell’ for the Supertrader course…

Throughout the education process I’ve gone through so far most of the things I’ve seen or read do not actually help you make money in the market.

How can this be…?

The vast majority of the ‘information’ sold with relation to trading is wrong. In the main it’s not intentionally wrong (misleading on purpose) but it is probably going to send you down a blind alley and while you figure out whether it’s right or wrong you’ll probably be losing money. Bugger eh? Here are some of the myths.

Newbie trading myth number 1… Fundamentals don’t matter, all you need to do is look at a bunch of charts and interpret them in the right way.

Frankly, this is total bollocks. No-one who’s made significant money in the markets (FX or stocks) has done so purely from a technical standpoint. I’d suggest if they did so they were in the right place, at the right time with a system that was ideal for the market at that point.

However, this myth is great for marketing and other companies trying to sell you their ‘course’ as it makes it sound like they have some sort of secret and it’s a shortcut to riches… If you haven’t realised by now that there are no shortcuts in life then please go back to watching Eastenders.

It’s human nature to want things to be easy, I understand that but please stop believing there’s a magic bullet. Technical analysis is not the be all and end all of trading. It might be a tool, it might help but thinking this is all you need to know will mean you lose money until you learn otherwise. [Any technical traders reading this – I am NOT ‘dissing’ TA only the marketing spin on what’s needed/involved which is very common in the UK]

Of the 40+ people I met who all started their trading journey in about Oct 2010 I know of 2 who are still trading… Everyone else has stopped or isn’t replying to email… probably also indicating that they stopped or blew up their account 😉

Newbie trading myth number 2… You can be successful at this and change your life in 30 minutes per day.

Holy s**t! Really? I’ve spent 5 years working out in the gym and I’m still not where I want to be on that topic yet… I looked back and reckon that’s maybe 500 hours over this whole time. Probably for the first 200 hours I had little or no clue what actually worked. Somewhere in the next 200 I could see I was making good progress. The last 100 or so hours have made me realise how far I am from where I want to be fitness wise and the sacrifices that will be involved if I really want to get there.

Now, if you’re an expert who has spent 10,000 hours trading then this may be true for you. Maybe. Working forwards by the time I’ve spent this long in the gym I’ll be a fantastic looking 134 year old corpse 😉

Newbie trading myth number 3… You can go from zero to hero financially in months

Please, just do the maths. NO ONE is making a 100% return in weeks. If they are then they’re taking completely mad risks and they’ll soon have no money to trade with.

Now, if you enter this arena when focussed on the end goal but don’t immediately (or quickly) begin moving towards this goal then you will get frustrated, upset and angry. Then you will quit. That was the end of your trading journey. How much you lost in the process depends on your emotional make-up… This is what most people do I guess.

Here’s the choice, the question you have to answer in your life.

Who do you want to be? What do you want? How are you going to get it? What sacrifices are you able/prepared to make in the pursuit of your goal? How long are you prepared to continue in the pursuit of what you want, or will you only go so far then quit?

Regardless of what you’re doing and where you’d like to be in the future it’s up to you.

Trading may not actually be the best way for you to get there so think about that before you give anyone your money to teach you or if you try to learn to trade by reading a lot of books. Read the section I’ve written on books for why I don’t think reading a library can help you learn to trade.

Just because you want the shiny things promised by the marketing people doesn’t mean they’re giving you the right information or that anything they say is actually true.

It’s the quality of the questions you ask yourself that determine the course of your life.

And if I’ve not managed to put you off then you’ll be needing some inspiration

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.

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20 thoughts on “Thinking of trading? Read this first…”

It has been said that trading is very simple, but also very hard. More than one great trader has stated that “You can get paid very well, for doing very little”. It is the surviving while you get to that point where the long, hard hours of graft come in, where dealing with the emotional aspect as well as employing appropriate risk management are more important than the entry/exit rules.

However, when you reach that state, then you can generate profits by being in front of a PC as little as 30 minutes per day. You can leverage your time by creating scans (either on a technical OR fundamental basis, or even both) that specify your entry criteria. It only takes a second to open or close a trade. Then you either specify an exit criteria (profit target), or the placement for your stop and let the trade run.

I would agree with the statement though, that to get to that stage you need to have spent a considerable period of ‘thinking time’ determining your framework for trading. This may involve trying different methods and timeframes. It is in this period that trading newbies tend to focus on entry rules, thinking that is the be all and end all, when in actual fact risk management is the most important factor, ensuring they stay in the game while they work out whether the rules they choose to employ generate a return, while also developing the psychological skills you require as you go. This is why 90% of all traders blow up within 6 months of starting.

Doing all this prep work, and fully understanding the consequences of any rules that you construct, and, most importantly, being 100% sure that you are fully ‘compatible’ with those rules, is what takes the time. Only once you get past that stage can you trade profitablilty using relatively little time.

Hi Steve – thanks for the comments, completely in agreement there. Just as you don’t get in a car for the first time and immediately turn onto the motorway you can’t possibly pick up a bunch of charts and make money from the markets. What a bugger!

I know how you feel , I opened my spread betting account in December 09 ,tried this and that and every indicator available and every time I thought I found a good system that worked I’d loose every day going forward so kept changing week after week .About a month ago ,I stopped jumping systems so it’s going ok for me now although I do get moments of madness were if I loose 2 or 3 trades in a row I revenge trade to make up what I lost

I have recently started the long journey of day trading, and have found your blogs refreshing to what’s out their. Thanks !

I started by reading half a book, ( yes a hole half ) then jumped in with a demo account on CFDs set up, to be honest I have picked up more from websites like yourself s and video clips on YouTube and then put what I have picked up in to practice.

Needles to say the twenty thousand demo account is now down to seven, which drew me to the conclusion that I should just do opposite to what I’m doing then I would be up by thirteen grand, I wish !!

Joking apart I knew their was more to it than just putting a trade on and getting out at a profit.
Discipline I have found is a major factor use them stop losses or loss your account !
To be honest aim lucky that my day job has allowed me to spend time researching and learning, hours and hours of videos and web pages.

So what next !!

I think I will start with a plan with what I have learnt so far, then included in the plan, areas that interest me, Like ftseday.co.uk ( Mike ) I would be interested in your opinion on what he does as I have seen some good and bad feedback, and as I’m sure your aware theirs plenty of con artists out there. Also what’s the general consensus on Oliver Velez ? , as allot of what he say make sense.
Could you also recommend a day trade web site that I could use preferable with a demo account first.

Any areas of interest that you may think would be a good place to look into, would be greatly appreciated.

1) Don’t have a plan for trading – FIRST have a plan for how you’re going to learn to trade. The best (well structured) information I’ve seen to date on this is by a guy called Chris Lori who you can check out here wish I’d found him sooner and there’s a stack of free info here that will put you straight on a few things 😉
2) If you’re going to learn to trade you can do an awful, awful lot worse than join Mike’s trading room. My humble opinion (now) is that you can’t learn to trade from books and you’re right – there are a ridiculous number of people selling crap out there. Mike met a bunch of the guys from his room in London this week and I’d have made sure to be there too had I realised in time. I can certainly say hand on heart that Mike is absolutely not a con-artist. Thing is though you need to be aware that there are a lot of people out there on the web with their own agenda and an awful lot of them don’t want to learn to trade they just want all the short-cuts. The shortcuts you try to take in achieving any worthy goal will come and bite you in the ass later Understand that you’re going to try to learn something that a ridiculous number of people fail at… You need to be prepared for reality. I’ve spent >650 hours on this topic and it’s made it clear to me how far I am from my goal. I am now implementing suggestion number 1 (above) finally. Some pointers on this in my latest blog post here
3) Oliver Velez I have no opinion on as I’ve never heard of the guy but if you check out forex peace army here it doesn’t look promising… If you’re really interested in EA’s then check out this site first. Personally I wouldn’t use one though because unless you develop it yourself it’s going to not help you to trade or understand the market at all.
4) Demo accounts are a dime a dozen although I’m now using this to teach myself properly

You need to do the due diligence (as you have done) and realise the end goal is to trade consistently by becoming an independent thinker. I stole that line from Chris Lori. Essentially I have started again from scratch by picking one FX pair, getting hold of 10 years of data and am now looking at how it moves to refine a strategy/approach that works for me. It’s not sexy but it’s not a shortcut either 😉

Look for VALUE and stay away from anyone that promises you can trade aftern spending £2K on a weekend course and then sit back making money by looking at charts for 1/2 an hour an evening in your pants. If it sounds to good to be true then it is. Invest in education but don’t get f***ed in the process.

Forget about the goal and love the process. I want a six pack (abs) so I’ve fallen in love with working out. The work is continually undertaking the process of improving. As long as you do this and don’t quit you WILL get there but understand that the end goal is only the beginning really. You never truly ‘get there’ 😉